Eurotech: letter to shareholders
March 17 2014 - 2:48AM
Italian Regulatory (Text)
Letter to Shareholders
Dear Shareholders, many things happened in the year just ended, and
in writing to you this letter I cannot avoid to go back with the
memory to the ferment that was in Eurotech in 2005 when we listed
on the stock exchange. Then the winds of recession and the global
economic crisis have turned off a bit the enthusiasm and also the
spotlight, not to mention that Italy has suffered and is still
suffering more than others this crisis, which in other Western
countries seems to have ended. Today, as then, Eurotech is facing a
new beginning: the potential yet to be seen is great and this time
to confirm it there are also the official recognition that we have
obtained in the course of 2013 with respect to the innovativeness
of our products. In April, we were named by Gartner as a "Cool
Vendor" in the "2013 IT / OT Alignment and Integration" report. The
title has been given to us for the innovative content of our EDC
(Everyware Device Cloud) solution, which is the combination of our
Everyware Cloud software platform for the integration of smart
objects which makes use of programming technologies of cloud
computing and ESF (Everyware Software Framework), a middleware
for the development of applications on embedded devices both our
own and third parties' ones to be connected to the platform. In
June, two Eurotech supercomputers finished first and second in the
"Green 500", the ranking of the most efficient supercomputers in
the world, with the installations of Eurora at CINECA and Aurora
Tigon at Selex ES, the company of the Finmeccanica group
specializing in IT security. Eurora ranked first with 3210 MFlop/s
per Watt (one watt per second is about the energy required to lift
a cup of coffee), while the Aurora Tigon system ranked second with
a value of 3180 MFlop/s per Watt. To give an idea of the importance
of the result, the third-ranked of the Green 500 was a system with
2450 MFlop/s per watt, which is 25% less than the performance
obtained by our computers. In September, we teamed with Oracle,
Hitachi Communication Technologies America and Hitachi Consulting
for a demonstration of "Internet of Things in Motion" at the joint
conference JavaOne / Oracle OpenWorld in San Francisco, the huge
global event of Oracle that once a year literally takes possession
of a piece of the city for five days and brings together some 60
thousand people from over 140 different countries. The live
demonstration of the solution to count visitors that used our EDC
technology for connecting devices and collecting data, together
with our people counters has been protagonist in both the JavaOne
Strategy Keynote on the first day and of the OpenWorld Keynote on
the last day. This gave great visibility to our technology for the
Internet of Things (or IoT) as well as to the Eurotech brand. All
of these are important achievements confirm both the quality of
staff dedicated to research and development and the rightness of
the vision on technology trends, as you will read later, and this
give us great energy to look at our future with confidence. Let's
take a quick look at the major economic and financial results of
the year just ended. In 2013 we had consolidated revenues of 66.1
million euros, down slightly from last year's figure at constant
perimeter and constant exchange rates. This figure was affected in
particular by two elements. The first is the cyclical nature of our
HPC business, which is still concentrated on a few customers and so
it is very variable depending on the timing with which we collect
orders; 2012 was a good year, 2013 was a year in which sales
reached a minimum, 2014 will be another good year. The second
element has been a shift in the delivery of two supplies already
under contract and very promising, related to our transportation
sector in the U.S., which inhibited the growth that we expected.
The reasons for these shifts are not dependent on factors under our
control and are mainly related to the procedures for the
qualification and testing of our customers' products. Although
these delays can be unpleasant, the potential of these large
contracts in the medium term remains intact. Everything that falls
to us has been made, the ball is in the customers' court, and we
just have to have a little patience: as often happens in large
supplies, the time frame of quarters is too fast to appreciate
their dynamics. It took us a few years of perseverance to win these
supplies and, most importantly, they will have an impact for a few
years on our future revenues, and it is to this objective that we
should stay focused.
EUROTECH S.p.A. Via Fratelli Solari, 3/a 33020 AMARO (UD) ITALY
Tel. +39 0433 485 411 Fax +39 0433 485 455 ir@eurotech.com
www.eurotech.com
Cap.Soc. 8.878.946,00 I.V. P.IVA / C.F. IT 01791330309 REA Udine
196115 Mod. Carint Ed 4.0 02/04/02
The Gross Margin is very close to 50%, in line with the figure for
the previous year, and this is a result that confirms once again
that customers recognize and reward the value add of our solutions,
even in a price sensitive market. The good performance of the gross
profit margin should not let our guard down on cost control,
because the rapid evolution of digital technologies repeatedly
opens up new spaces for improvement, which should be examined every
day through a continuous monitoring process. Group EBITDA was
positive, albeit slightly, in spite of a lower level of turnover
compared to the real capacity of our industrial machine. This
figure tells us then that the Eurotech machine has today reached a
good degree of efficiency and is ready to generate profits as soon
as those major contracts in the backlog will enter the delivery
phase. I wish to emphasize that the efficiency of the operating
structure has been achieved in recent years without affecting our
investments in innovation and therefore with great care to preserve
our competitive drive. The important milestones achieved in 2013 in
terms of external recognition to the quality of our innovations are
there to confirm it. Another positive note is related to the
working capital: in 2013 we dropped below the threshold of 20% of
revenues, compared with a value of over 25% in 2012 at constant
scope of consolidation. It's true that in this reduction we have to
consider the effect of lower sales in the fourth quarter of 2013,
but even considering this factor the improvement is significant and
confirms that the control processes in place work, so from here
forward growth can occur in a more financially sustainable way. We
come now to what lies ahead in the coming quarters. We are at a
point of discontinuity in the history of Eurotech, and this new
beginning will feed on what we have built so far. With the sale of
Parvus we got in advance the cash flows that Parvus would have
generated over the next 7-8 years and we have simplified the
operational structure of the Group, with a benefit on both the
strategic focus and the agility to maneuver. The traditional
business of NanoPCs, that is embedded computers for special
applications, can now rely on a wellcalibrated structure, with
costs under control and working capital properly sized, ready to
support a turnover between 90 and 100 million euros. This is the
level that will allow us to return to the size we had before the
sale of Parvus, but with more margins so with a net profit and a
chance to give some dividends. With the expected growth of our
traditional business of embedded computers we will have the
opportunity to recover both the turnover and the EBITDA formerly
coming from Parvus in about 18-24 months, thanks to the two major
contracts mentioned above, that despite their slower development
dynamics in the long run will show their positive effects. We have
cash of 28 million euros and a net cash of 15 million euros and
this allows us to look with confidence to the development of our
strategic directions of the Pervasive Computer (Embedded PCs, M2M
solutions , solutions for security and surveillance) and low-power
Supercomputer (Green HPC). At the same time this gives us the
opportunity to accelerate investments to faster expand our market
presence. With our M2M solutions and our Xentinel solution for
surveillance and security we can count on an innovative value
proposition for the Internet of Things and for Smart Cities, while
with our Aurora G-station and our mobile HPC solutions we can face
the Green HPC market and the High Performance Embedded Computers
(HPEC) market. Due to the amount of devices in the catalog and the
combination of HW platforms and SW platforms, Eurotech is now able
to provide its customers with complete solutions for the
implementation of asset monitoring projects, where "asset" can be
virtually anything that can be digitally identified. We will work
to align the organization to the needs of business development of
M2M solutions, solutions for security & surveillance and the
Green HPCs. We will immediately make some shrewd investments to
strengthen the marketing and sales structures that support these
three strategic lines of business. Then we will continue with the
investments in this direction, in proportion to our spending power
and modulating the actions of strengthening the structure as a
function of the development of turnover, always in a sustainable
fashion. In connection with the expansion of the organization of
direct sales, will push the development of indirect channels
through new partnerships and new distribution agreements, which
will complement the internal structure of direct sales. With the
new type of products that combine hardware and a software platform
as-a-Service, we have the
EUROTECH S.p.A. Via Fratelli Solari, 3/a 33020 AMARO (UD) ITALY
Tel. +39 0433 485 411 Fax +39 0433 485 455 ir@eurotech.com
www.eurotech.com
Cap.Soc. 8.878.946,00 I.V. P.IVA / C.F. IT 01791330309 REA Udine
196115 Mod. Carint Ed 4.0 02/04/02
ability to transform our hardware devices in devices as-a-Service,
thus opening the possibility of starting such a business model with
recurrent sales of services, user fees and support. In this process
of strengthening the structure to accelerate the market penetration
of the three lines of business I just mentioned, we will also
consider the option of strategic acquisitions. In our approach,
they are the catalysts of the implementation of the strategy and
from this point of view we are looking at what the market offers
today, aiming at targets that can be easily integrated in the
existing Group organization. Unfortunately, the recent acquisitions
in the Internet of Things space have created sudden inflation of
the evaluations of the companies, especially in the American area.
This will complicate a bit our work and will require us to be even
more rigorous in the assessment of targets and to have a little
more patience than expected. Finally I would like to say a few
words about the future that is ahead of us. Supercomputing has
become an increasingly important resource, if not indispensable, in
many industrial processes and for the competitiveness of
enterprises. We are all witnessing a spread of supercomputing
applications outside the traditional scope of the research centers
and, given the amount of data that will sharply rise in the near
future in virtue of IoT applications, there will be soon the need
to analyze large masses of data to extract information hidden in
them: the so-called "big-data". Even in Europe the HPC market is
getting traction, thanks to the drive that the EU is giving to the
sector. Already in 2011 Eurotech was one of the founders, along
with the most prestigious European research centers and the main
European suppliers of HPC technologies, of the European Technology
Platform dedicated to High Performance Computing (ETP4HPC). This
initiative is an important step to encourage and strengthen the
position of European companies in the field of HPC. The impressive
contribution of skills by the members of this initiative shows
that, for years to come, Europe has a real chance to get a leading
position in the HPC industry. The birth of an HPC ecosystem that is
vital and competitive compared to the U.S. or Asian ones will be
clearly very closely linked to the size of public investments that
the European Union will make available: in this regard, in December
2013 the ETP4HPC and the European Commission signed a
public-private partnership in the form of a contractual agreement
(cPPP) with which the Commission and the representatives of the
industry will provide vital funding for research and innovation in
the field of High Performance Computing . The cPPP will implement
the strategic agenda for research and innovation through co-funded
projects, selected through Horizon 2020 calls. The Commission and
the industry associations of reference have reached an agreement on
a total indicative budget for the period 2014-2020. The budget will
be formally announced on an annual basis in the operational
programs of Horizon 2020. Overall, for the period of seven years
identified, European Community funding are expected to be in the
order of EUR 700 million, of which EUR 142 million in the period
2014-2015. I believe that this renewed interest of the European
Union for supercomputing and the creation of a European industry in
the field of HPC can only result in an excellent growth opportunity
for our company. In summary, we can say that we are in the right
path at the right time. This applies both to the HPC division and
the NanoPC one: with regard to the latter, in fact, the recent
acquisitions made by PTC and Google have given the signal that the
time of the Internet of Things has come. In addition, they also
give other two indications: the acquisition made by PTC confirms
that the competition will be played a lot on SW platforms; the
acquisition made by Google tells us that not only having control of
user data but also having control over data from the devices will
be of strategic importance. We are facing an imminent Cambrian
revolution of business models: alongside with the economy of atoms,
a great economy of digital data the bits will grow. As in the
world of atoms the development on a global scale has been enabled
by the logistics of goods, in the same way in the world of bits the
development on a global scale of a new economy of data will be
linked to the availability of a logistics of data. Moreover, if in
the world of physical goods handling is done by means of logistics
platforms of national and international operators who specialize in
this type of service, in the cyber world made of bits the logistics
of data will be carried out by software platforms, like our one,
resident in the Cloud and capable of connecting machines with
machines and machines with humans, while maintaining data producers
on the one hand distinct and independent from data consumers on the
other, all in a fast, safe and reliable way.
EUROTECH S.p.A. Via Fratelli Solari, 3/a 33020 AMARO (UD) ITALY
Tel. +39 0433 485 411 Fax +39 0433 485 455 ir@eurotech.com
www.eurotech.com
Cap.Soc. 8.878.946,00 I.V. P.IVA / C.F. IT 01791330309 REA Udine
196115 Mod. Carint Ed 4.0 02/04/02
The combination of widespread and broadband communication
infrastructure, computing and data storage as a utility, smart
objects spread in the environment and data integration SW platforms
will create new ways of doing business: not only new services and
new enterprises will arise, but also the traditional businesses
will be transformed. We could say in a phrase that only those who
will change will have the passport to enter into this new world. A
really radical transformation is in sight. We are moving into the
era of "servitization": we will more and more buy the use of
products and there will be less and less interest in owning them.
In many areas where high digitization is already a reality things
work in this way. It is not a matter of "if", rather a matter of
"how" and "when": in a recent study, McKinsey says that at least
80% if not 100% of the companies will be impacted by the IoT. As
the steam engine started the industrial revolution, so the IoT
technology will kick off a new revolution: we will see the birth of
a new form of economy of bits which will complement that of atoms
we have experienced so far and which will shake up business models.
Even in this new economy logistics will be the key element, and in
the world of data logistics will be performed by machine-to-machine
platforms that will be available as-a-service. That's why we've
invested in that direction. For over twenty years Eurotech has been
creating and offering embedded computers and this type of
technology continues to be in our DNA. We began addressing the
challenge of real time control of machines and plants, and we
continue to innovate our offer in this space. But we did not stop
there: as we continued to develop new products for the real time
control of devices and processes, since 2009 we started to develop
an M2M software platform to easily interconnect smart devices
distributed on a global scale and to create flows of information
between these devices that were easy to access no matter where you
are. Among the first in the world, we have learned to collect the
data from real-world processes and to transport them quickly,
efficiently and securely in the cloud, enabling our partners and
customers to easily build flexible and scalable distributed
systems, capable of supporting asset monitoring applications and
new value-added services. Around this massive digitization a new
world of applications is being born, as well as a market with size
and potentiality never seen before. There are those who estimate
that by 2015 there will be 25 billion intelligent devices connected
to the Internet (more than 3 per human), and that by 2020 that
figure will climb to 50 billion (about 7 per human). This gigantic
population of devices will produce a huge amount of data that will
need to be collected and processed. In order for all of this to
produce positive effects in terms of economic development and
sustainability, we will need solutions that simplify and make cost
effective the development of these new applications. This is
exactly what we have achieved with our products, that easily and
inexpensively interconnect intelligent devices between them and
with the infrastructure of the Cloud (M2M platforms) and which also
allow to process large amounts of data (Green HPCs). After more
than five years of research and innovation, we are now ready to
face the challenges of the market and the blue ocean of
opportunities that are right in front of us. New territories lie
open to our view. New achievements are possible. Therefore, with
the support of you all, let's begin a great new journey. 17 March
2014 signed Roberto Siagri President & CEO
This document has been translated into English for the convenience
of readers outside Italy. The original Italian document should be
considered the authoritative version.
EUROTECH S.p.A. Via Fratelli Solari, 3/a 33020 AMARO (UD) ITALY
Tel. +39 0433 485 411 Fax +39 0433 485 455 ir@eurotech.com
www.eurotech.com
Cap.Soc. 8.878.946,00 I.V. P.IVA / C.F. IT 01791330309 REA Udine
196115 Mod. Carint Ed 4.0 02/04/02
Eurotech (BIT:ETH)
Historical Stock Chart
From Jun 2024 to Jul 2024
Eurotech (BIT:ETH)
Historical Stock Chart
From Jul 2023 to Jul 2024
